What’s the difference between a credit card, a charge card and a debit card?

A credit card is effectively a loan from the credit card company. Each time you make a purchase, the credit card company is loaning you the amount of the transaction. For example, if you make a $100 purchase on your credit card, the credit card company lends you $100. With a credit card, you do not have to pay off the entire balance each month, but the credit card company charges interest on your unpaid balance.

The balance on a charge card must be paid off each month. You cannot carry a balance from month to month like a credit card. A charge card is like a short-term loan, with a term of about 30 days. Charges not paid in full may be subject to hefty late fees or even cancellation of the card.

A debit card removes money from your account after a purchase. It is like a check that deducts from an account that already has money in it. Certain debit cards are also called check cards for that reason.

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How can I get the best rates on my credit cards?

If you have a good credit score, you will get the best rates. Paying at least the monthly minimum and paying on time will help you maintain a good credit rating.

Should I apply for a credit increase, or an additional credit card?

Before applying for a credit increase or an additional credit card, carefully analyze how you are managing your current credit line. If you are having problems making payments, or making them on time, additional credit may only make your situation worse.

If you are paying too much in fees or interest, before switching to another credit card, contact your current credit card company for better rates and/or lower fees. Many companies will be willing to work with you to keep you as a customer, especially if you have a good record. And, it’s best to work with your credit card company when you begin encountering problems, and not after your debt has spiralled out of control.

Stay out of trouble. Pay off your credit card debt each month. If you cannot do that, pay off as much as you can. To reduce the time it will take to pay off your credit card debt, pay more than the monthly minimum. And, always pay your credit card bills on time. Mail your payments early—don’t rely on the post office to deliver it on time.

Ten steps to financial freedom. Whether you have a good credit rating or a lot of debt to pay off, these ten steps can help you stay or get on track.

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